There’s nothing as depressing - and this is written in the context of a global pandemic, a potential Cold War with China and the strong possibility of a no deal Brexit - than logging into your Student Loan account online, only to be told that yes, it’s been a decade but you’ve still only paid off the interest, and no, your massive student debt isn’t going anywhere any time soon.
But if you’ve been one of those who have been able to save a little extra money in lockdown and are considering paying some of your loan off using the quick repayment option, you might want to read on first.
Martin Lewis ofMoneysavingexpert.com has criticised the Student Loans Company for exaggerating the status of people’s unpaid loans, and prioritising quick repayment options with the new version of their website, which encourage people to make early payments that in fact make no difference to the total amount most people end up repaying in the end.
He said, “I will be writing to the Student Loans Company and the universities minister, Michelle Donelan, calling for the quick repayment facility to be removed immediately – it is far too flippant a tool for such a substantial and risky transaction – and calling again for a thorough overhaul of this misleading new government website.”
Lewis points out that repayments are fixed at 9% of a student’s income above £26,575, with the rest written off after 30 years for students from 2012 onwards
“The first thing university leavers see when they log in, in a large font, is the amount of ‘debt’ they owe. This is demoralising, damaging and dangerous. Owing £30,000, £300,000 or £3m makes no difference to your annual repayments,’ Lewis added.
‘The only impact the amount of debt has is whether you clear it or not within the 30 years before it is wiped. And it’s predicted the vast majority – 83% – of university leavers won’t earn enough that their repayments clear it in full. They’ll keep repaying for the whole 30 years, like an additional tax – so the amount of debt for them is pretty irrelevant.’
In response, David Wallace, the Student Loan Company’s deputy chief executive said that the new website was in response to extensive consultations with users, as well as two meetings with Money Saving Expert. ‘We think we’ve done a really good job here for customers, the feedback we’ve had was good. So we were really disappointed at the reaction from Moneysavingexpert,’ Wallace said. ‘We’re providing the balances that the customers have asked for, and it certainly hasn’t put off any prospective students from taking out student funding for higher education. So we think we are doing the decent thing for customers by listening to them and responding.’
Students who started university in England last year are forecast to accrue more than £40,000 in loans from the SLC, on average, by graduation. Lewis's point is that the big outstanding loan figure you'll see when you log onto the site is 'scary but misleading,' not least because so many of us won't end up paying back the full amount. And at a point when many of us have extra money in the bank, either because we've been spending less, or even because we've had a one-off redundancy payment, and when so many of us are facing an uncertain financial future, this stuff is more important to understand than ever.